A homeowner who said an earthquake damaged her property will be covered for repairs after an Australian Financial Complaints Authority (AFCA) ruling found her insurer failed to establish grounds to decline the claim. 

The complainant lodged a claim on October 8 2021, after noticing damage and cracking to parts of her home’s interior that amounted to repairs valued at $74,690. 

The claimant alleged the damage had been caused by an earthquake that occurred a few weeks beforehand, noting the cracking had not been present when she renovated the home in December 2020.  

Suncorp declined the claim, saying the homeowner had not established that the damage had been caused by a “single earthquake or accident”.  

But AFCA challenged the insurer’s argument, saying that the complainant had established a valid claim as the damage was accidental and occurred during a period of insurance. It said that the onus was on the insurer to prove why the claim was excluded from coverage.  

The insurer said that assessments from its experts showed that the damage stemmed from seasonal ground movements, which was excluded from the home and contents policy. 

A Suncorp-appointed builder said many of the cracks were inconsistent with earthquake damage and had already been there. 

However, the builder recommended further inspections and that the insurer appoint an engineer to get a better perspective on the cause of the damage. 

Suncorp engaged with an engineer, referred to as KM, who provided a report in May last year after completing a “visual inspection” of the property in March. AFCA said it was “unclear” why the insurer had taken more than six months to appoint the engineer.  

KM said it was improbable for the earthquake to have caused the damage to the property given the distance between the quake’s epicentre in Northern Victoria and Melbourne and instead attributed it to rainfall and seasonal earth movement. 

The engineer noted that the area had experienced increased rainfall compared to average levels causing more moisture in the soil to generate shrinkage and movement. KM reported that given the building’s older age, its structure had not been strong enough to withstand the movement. 

A complainant-appointed expert, referred to as SD, disputed KM’s findings, saying that cracks to the internal plaster and external walls had been “major and irregular with the general aging of the building”. 

SD noted that a floor-level survey showed that the subfloor had visibly moved following the earthquake causing floorboards to be “warped, drummy and severely uneven,” and highlighted significant damage to the building’s stumps. 

“Although some movement is expected to occur between summer and winter cycles on highly reactive sites such as this one, it appears that the damage occurred to the property has had the influence of the earthquake that occurred in the dislodgement of the entire subfloor structure,” SD said. 

AFCA also disputed KM's findings, saying they had not shown how the rainfall data contributed to the ground movement and that their analysis of soil reaction to moisture had been “generic in nature”.

The ruling further said that KM had not addressed the insured’s claim that the cracking had not been present when the property was being renovated in 2020, saying that the engineer’s assertion that the works had been “cosmetic in nature” was unproven. 

AFCA also acknowledged a note in Suncorp’s claims contact file from November 24, 2021, that asked for an engineer’s report to “cover all bases” after the complainant had informed the insurer that she would challenge the decision to deny the claim. 

AFCA said the note suggested that the engineer’s report had been made “merely to affirm the denial as opposed to genuinely assess the damage”. 

“I do not accept the insurer has sufficiently established the application of the policy exclusion for seasonal ground movement,” AFCA said. 

“In weighing up the material before me, the dislodgement of the sub-floor appears to be related to the cracking which the complainant asserts occurred after the earthquake.”

The ruling required Suncorp to accept the claim and cover repair costs associated with a scope of works submitted by the complainant. 

The insurer was also required to pay the homeowner $1000 for inconveniences generated by delays with the claims handling. 

Click here for the ruling.